The benefits of debit & credit cards

Debit and credit cards have been around for decades and become a large part of the British economy. Although the economic downturn has produced a marked decrease in the use of credit cards across the UK, as reported by Research and Markets, the benefits of debit and credit cards remain strong.

Cash on Demand

• Both debit and credit cards allow holders to withdraw money from cash machines at any time, almost anywhere in the world. This gives you a distinct advantage. When you need to buy something but the bank is closed (such as on a Saturday afternoon or Bank Holidays), you can still access your money. Overseas, the use of debit and credit cards can reduce the amount of foreign money you need to purchase before going on holiday.

Accepted Widely

• Debit and credit cards are accepted in shops around the world, as well as online. Paper money and coins need exchanging when you leave the country, which leaves you open to fluctuations in the exchange rate, while a debit or credit card will still work. Using a card online is fast and secure, with the only alternative being to risk sending a cheque or postal order through the post.

Extra Insurance

• If you purchase goods or services with a “cash price” of between £100 and £30,000 using a standard credit card (eg, Visa or MasterCard but not charge cards like American Express), you gain an extra level of security on your purchases following section 75 of the Consumer Credit Act 1974. This Act allows a consumer to sue the credit card company as well as the supplier when the goods or services are faulty.

Considerations

• When budgeting to pay off a credit card, it is wise to remember that interest on credit is charged from the day the credit is used, rather than on the total at the end of the month. As a result, you may find you have to pay more (or, occasionally, less) interest than expected each month if you are calculating payments based solely on the balance outstanding.

Warning

• Credit card limits are set by the card provider on the understanding that the amount borrowed will be paid back over time. It is in your best interest to pay off this debit as soon as possible, to avoid paying interest on the outstanding loan. Similarly, some debit cards allow you to go “overdrawn” on your account, causing a (sometimes large) administration fee to be payable if you exceed your agreed overdraft limit.